Ares Management has emerged as a potential buyer of private debt specialist Hayfin Capital Management in a deal that would more than double the size of the US alternative investment giant’s direct lending business in Europe.

The Los Angeles-based firm is considering an acquisition of Hayfin as it seeks to expand its direct lending business on the continent, according to people familiar with the situation.

Hayfin is expected to be auctioned in the coming months after its majority shareholder transatlantic private equity firm TowerBrook Capital Partners decided to sell the business.

Investment bank UBS, a long-standing adviser to Hayfin, will advise on the sale.

One of the people said that it is difficult to gauge how much Hayfin might fetch at auction. Two people said TowerBrook could opt to hold on to the business if offers do not match its expectations.

According to its most recent set of accounts, Hayfin generated a profit of £7.8 million for the year ended December 2012.

The firm has grown considerably since inception, with additional offices in Amsterdam, Paris, Madrid, Luxembourg, Frankfurt and New York. It has over €5.3 billion of assets under management across a range of lending and collateralised loan obligation funds.

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An acquisition by Ares would see the firm expand its European business, which was set up in 2007 and has since become a go-to shop for debt to finance mid-market buyouts on the continent, according to advisers.

Based in London’s iconic Gherkin building, Ares’ European team has offices in Paris, Stockholm and Frankfurt, and about $5.5 billion of assets under management in direct lending products.

Ares began issuing leveraged loans and high-yield bonds and has since grown into an alternatives investment powerhouse, with $74 billion in assets under management across tradable credit, direct lending, private equity and real estate.

The firm’s initial public offering in May this year valued 53-year-old Ressler’s roughly 30% stake in Ares at about $1.2 billion.

The sale of Hayfin is likely to attract considerable interest from other potential suitors as the emergence of an institutional lending market continues to gather pace in Europe.

Around £3 billion was deployed by private debt funds in the first quarter of the year, according to professional services firm Deloitte. This is double the value of transactions recorded during the same period last year.